Do Assets Acquired After A Complaint For Divorce Has Been Filed In N.J. Become My Separate Property?

May 21, 2018
By
Law Offices of Edward R. Weinstein

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Yes. As a New Jersey divorce attorney I can certainly state that any “assets” obtained by profitable work while the husband and wife were still married are subject to equitable distribution. However, as the lawyers at our law firm embrace, such assets acquired by either the husband or wife earnings after the Complaint for Divorce has been filed is now that individual’s sole possession.

In Reinbold v. Reinbold, Linda Reinbold appealed an order of the Superior Court of New Jersey, Family Part of Warren County that denied her motion for post-divorce relief relating to her share of her ex-husband’s enhanced pension. While the Family Part judge concluded that she was not entitled to share in the enhanced pension, the New Jersey Appellate Division held that she did have a right to share in her ex-husband’s voluntary retirement package because it was a result of effort expended during the course of the marriage.

Linda and Frank Reinbold got married on October 29, 1960, and had two children together. Linda filed a complaint for divorce on June 20, 1994 after thirty-four years of marriage. When the complaint was filed, Frank was fifty-five years old, and had spent twenty-eight years working at Sandoz Pharmaceuticals.

On May 13, 1996, a property settlement agreement was incorporated into the couple’s final judgment of divorce. In the property settlement agreement, Frank agreed to divide the marital assets equally, and pay Linda permanent alimony. Equitable distribution of the pension was addressed in paragraph 27 of the agreement, which stated that Linda would get 50% of all benefits Frank acquired in the pension from the date of the marriage to the date the complaint for divorce was filed. Under Sandoz Pharmaceutical’s retirement plan, Frank could retire at sixty-two. His basic retirement benefit would be calculated according to his average yearly compensation and credited years of service, offset by social security. The calculation of his pension benefit was supposed to occur at the time of his retirement, because the calculation was dependent on his years of service, and his average annual income and Social Security benefit at that time.

Around two months after the divorce was finalized, in July 1996, Sandoz Pharmaceuticals offered Frank a voluntary retirement package, because the company had just merged with another, which resulted in downsizing. Frank alleged that he could either accept the package or face the termination of his job. He decided to accept the package, and retired on October 1, 1996, over two years after the complaint for divorce was filed. He received an enhanced benefit package that added five years to his age and service years, that increased the value of the ultimate pay-out he received. In addition to the enhanced pension, he received a special incentive payment, which basically means a severance payment, in the amount of $ 56,924.41.

Both Frank and Linda submitted a proposed qualified domestic relations order to the pension administrator at Sandoz Pharmaceuticals, in furtherance of the property settlement agreement. Both parties agreed that the coverture fraction should be: 28 years (employment during coverture)/Number of years worked x Pension Benefit x 50%. However, since the qualified domestic relations order was not in place at the time Frank started receiving his pension, Linda did not get her share at that time. Still, Frank placed Linda’s one-half share of the pension into a separate interest bearing account, to be dispersed when the issue was resolved. Linda filed a notice of motion for post-divorce relief through a determination of whether the enhanced pension should be shared with her on March 20, 1997.

The Family Part judge held that Linda was not entitled to share in her ex-husband’s enhanced pension. The judge reasoned that according to the strict terms of property settlement agreement, she was to only supposed to receive half of the pension up to the date that the compliant for divorce was filed, and Frank received his voluntary incentive package two months after the divorce was finalized.

Linda appealed the Family Part decision and argued that she should be entitled to half of that voluntary retirement incentive package because Frank attained the benefits while they were married, and that the benefits package did not come from any actions taken after the divorce. The New Jersey Appellate Division reviewed her appeal and held that she did have a right to share in her ex-husband’s voluntary retirement package.

The New Jersey Appellate Division explained that when Linda and Frank drafted the property settlement agreement the basically created a deferred distribution structure where the dependent spouse would not receive any distribution of benefits until those benefits were actually paid to the supporting spouse. This system was intentionally chosen because the value of the benefits package depended on how much Frank earned, and how long he actually worked there and was subject to a Social Security set-off. The complication in this case was the voluntary retirement incentive package, when it was acquired and if it was subject to equitable distribution.

For property to be eligible for equitable distribution it must have been acquired by the couple legally and beneficially during the marriage. As such, the question of whether the enhanced pension was subject to equitable distribution rested on the nature of the asset and exactly how it was earned. The New Jersey Appellate Division analogized this issue to the 1989 New Jersey Supreme Court case of Moore v. Moore, that held the cost of living increases to a spouse’s post retirement pension were subject to equitable distribution because they stemmed from “past contributions and services” that occurred during the course of the marriage.

The New Jersey Appellate Division also relied on the 1992 Bergen County Family Part case of Ryan v. Ryan, where a husband’s severance-pay, which was paid more than two years after the complaint for divorce was filed, was considered a marital asset and subject to equitable distribution. The court noted that the severance payment was offered by his employer as an incentive to leave the company, based on a need to cut back employees, much like the enhanced pension in Reinbold. The judge in Ryan found that the payment was based on the supporting spouse’s weekly pay and years of service, and determined that payment was a form of compensation labor that happened in the past, and was not an alternative for future earnings.

Similarly, in the 1995 case of Pascale v. Pascale, the Supreme Court of New Jersey determined that a stock options award was subject to equitable distribution because, even though even it was dispersed after the divorce was filed, it was acquired by the direct result of effort exhausted during the marriage. The New Jersey Appellate Division applied the rule established in these cases and held that assets attained from gainful work done during the marriage or as a reward for the same labor are subject equitable distribution, but assets attained after the termination of the divorce that were acquired solely from one spouse’s income are that spouses separate property.

In Reinbold, the employed spouse, Frank, argued that he did not earn his enhanced pension during the course of the marriage, but that it was actually a replacement for future earnings, that would have been his separate property otherwise, and not included in the distributive scheme. However according to the facts of case, the New Jersey Appellate Division found that the enhanced pension was offered to him in recognition of his age and the faithful service he exhausted during the twenty-eight years he worked at Sandoz. This effort and service was largely exhausted during the time he was married to Linda. Therefore, the New Jersey Appellate Division reversed the order of the Family Part, and ordered a new hearing to calculate what share of the enhanced pension Linda was entitled to.

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